U.S. Rep. Rodney Davis (R-Ill.) today introduced legislation, the Employer Participation in Refinancing Act, to help individuals pay down their student loans. The legislation would provide a new tool to help employers recruit and retain employees by allowing them to help qualified employees repay student loans with pre-tax dollars.

“Seven in ten college seniors last year graduated with student loan debt – which now represents the second highest form of consumer debt,” said Davis. “The Employer Participation in Refinancing Act encourages employers to be part of the solution by allowing them to offer an employee benefit that will help graduates pay down their student debt. With outstanding student loan debt totaling more than $1 trillion, we must find ways to engage the private sector and help graduates manage their debt.”

Currently, the Employer Education Assistance Program allows employers to contribute pre-tax earnings to help employees finance continued education, but does not allow relief for individuals who already have incurred student loan debt in the course of their undergraduate or graduate careers.

The Employer Participation in Refinancing Act provides incentives to employers to subsidize student loan refinancing for their employees in the same way employers today can subsidize ongoing tuition expenses.

Benefits to employees include:

• Will receive a tax-exempt benefit of up to $5,250 per year to reduce the cost of their refinanced loan.
• Employees with good credit may be able to refinance their federal student loan debt with private lenders at lower interest rates while still receiving many of the same protections provided by federal loans.

Benefits to employers include:

• Permits employers to assist employees who already have student loans to the same degree they can help employees with continued education.
• Helps companies recruit and retain young, educated talent.
• Employers can deduct the subsidy provided to employees.

Identical legislation has already been filed in the Senate by U.S. Sens. Mark Warner (D-Va.) and John Thune (R-S.D.).